Coffee Holding Co., Inc. Reports Results for the Three and Nine Months Ended July 31, 2013

Marketwired

STATEN ISLAND, NY--(Marketwired - Sep 11, 2013) - Coffee Holding Co., Inc. ("Coffee Holding") (NASDAQ: JVA) today announced its operating results for the three and nine months ended July 31, 2013.

Results of Operations

The Company had a net loss of $2,108,911, or $0.33 per share (basic and diluted), for the three months ended July 31, 2013 compared to net income of $1,231,196 or $0.19 per share basic and diluted, for the three months ended July 31, 2012. The Company had a net loss of $1,566,886, or $0.25 per share (basic and diluted), for the nine months ended July 31, 2013 compared to net income of $2,439,293 or $0.38 per share basic and $0.37 diluted, for the nine months ended July 31, 2012. The decrease in net income reflects losses realized in the Company's hedging activities as coffee prices continued to decrease on an unabated slide to a four year low during the period.

Net sales totaled $32,370,692 for the three months ended July 31, 2013, a decrease of $12,113,761, or 27%, from $44,484,453 for the three months ended July 31, 2012. The decrease in net sales reflects lower coffee prices as coffee prices continued to decrease on an unabated slide to a four year low during the same period, partially offset by a 13.7% increase in pounds of green coffee sold as the Company's business continued to shift to sales of green coffee from private label sales. Net sales totaled $100,375,542 for the nine months ended July 31, 2013, a decrease of $37,796,153, or 27.35%, from $138,171,695 for the nine months ended July 31, 2012. The decrease in net sales reflects lower coffee prices as coffee prices continued to decrease on an unabated slide to a four year low during the same period.

Cost of sales for the three months ended July 31, 2013 was $33,526,657 or 100.3% of net sales, as compared to $40,606,840 or 91.3% of net sales for the three months ended July 31, 2012. Cost of sales for the nine months ended July 31, 2013 was $96,463,019 or 96.1% of net sales, as compared to $128,472,249 or 93% of net sales for the nine months ended July 31, 2012. The increase in cost of sales reflects losses realized in the Company's hedging activities and lower prices paid for green coffee during this period compared to the same period during 2012.

Total operating expenses increased by $24,333, or 1.3%, to $1,883,005 for the three months ended July 31, 2013 as compared to operating expenses of $1,858,672 for the three months ended July 31, 2012. The increase in operating expenses was due to an additional pay cycle during the quarter partially offset by a decrease in selling and administrative expenses. Total operating expenses increased by $95,038, or 1.7%, to $5,674,149 for the nine months ended July 31, 2013 as compared to operating expenses of $5,579,111 for the nine months ended July 31, 2012. The increase in operating expenses was due to an additional pay cycle during the quarter and an increase in selling and administrative expenses.

"We believe our business is strong and will continue to grow. Our operating results during the quarter were primarily affected due to our realized losses relating to our hedging activities as a result of a continued decrease in coffee prices during the quarter. Although we believed at the beginning of the quarter that coffee prices would stabilize, coffee prices continued their unabated slide to four year lows and we exited out of certain long-term positions which negatively impacted our gross margins. This four year decline in coffee prices represents an approximate 60% decrease from the high achieved in May 2011. However, we believe that such actions were necessary to ensure that we maintained a strong balance sheet," said Andrew Gordon, President & CEO.

"During the quarter, we continued to focus on sales of wholesale specialty green coffee and increased our volume in pounds of specialty green coffee sold by 13.7% from approximately 10.7 million pounds to 12.2 million pounds. We believe that the increase in our sales volume of specialty green coffee demonstrates the sustainability and continued potential for growth in our wholesale specialty green coffee business model. Our continued shift from private label sales to enhance our position as a dominant integrated wholesale-roaster dealer of specialty green coffee places us in a strong competitive position primarily due to our long term relationships, unique product offerings and the vertical integration of our business, allowing us to create synergies for our customer base that our competitors cannot achieve," continued Mr. Gordon.

"In addition, we continue to focus on the expansion of our proprietary brands and the development of our sales inroads in China. We believe that these initiatives along with our dominant position in the specialty green market space will provide us with continued revenue growth opportunities and will strengthen our operating performance. We also remain open to opportunities that would enhance shareholder value, including acquisitions, joint ventures or other strategic alternatives," concluded Mr. Gordon.

About Coffee Holding

Coffee Holding is a leading integrated wholesale coffee roaster and dealer in the United States and one of the few coffee companies that offers a broad array of coffee products across the entire spectrum of consumer tastes, preferences and price points. Coffee Holding has been a family-operated business for three generations and has remained profitable through varying cycles in the coffee industry and the economy. The Company's private label and branded coffee products are sold throughout the United States, Canada and abroad to supermarkets, wholesalers, and individually owned and multi-unit retail customers.

Any statements that are not historical facts contained in this release are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. We have based these forward-looking statements upon information available to management as of the date of this release and management's expectations and projections about certain future events. It is possible that the assumptions made by management for purposes of such statements may not materialize. Actual results may differ materially from those projected or implied in any forward-looking statements. Such statements may involve risks and uncertainties, including but not limited to those relating to product demand, coffee prices, pricing of our products, market acceptance, the effect of economic conditions, intellectual property rights, the outcome of competitive products, risks in product development, the results of financing efforts, the ability to complete transactions, and other factors discussed from time to time in the Company's Securities and Exchange Commission filings. The Company undertakes no obligation to update or revise any forward-looking statement for events or circumstances after the date on which such statement is made.

   
   
COFFEE HOLDING CO., INC.  
CONDENSED CONSOLIDATED BALANCE SHEETS  
JULY 31, 2013 AND OCTOBER 31, 2012  
(Unaudited)  
   
  July 31, 2013     October 31, 2012  
               
- ASSETS -  
CURRENT ASSETS:              
  Cash $ 3,483,229     $ 7,568,583  
  Accounts receivable, net of allowances of $213,674 for 2013 and 2012   12,255,619       12,633,128  
  Inventories   9,659,829       11,303,581  
  Prepaid green coffee   428,231       150,000  
  Prepaid expenses and other current assets   404,495       704,013  
  Prepaid and refundable income taxes   1,923,560       62,763  
  Deferred income tax asset   513,875       702,655  
    TOTAL CURRENT ASSETS   28,668,838       33,124,723  
Machinery and equipment, at cost, net of accumulated depreciation of $2,981,415 and $2,631,468 for 2013 and 2012, respectively   2,030,688       1,791,754  
Customer list and relationships, net of accumulated amortization of $24,375 and $18,750 for 2013 and 2012, respectively   125,625       131,250  
Trademarks   180,000       180,000  
Goodwill   440,000       440,000  
Equity method investments   98,755       1,931,931  
Deposits and other assets   623,271       648,094  
      TOTAL ASSETS $ 32,167,177     $ 38,247,752  
- LIABILITIES AND STOCKHOLDERS' EQUITY -  
CURRENT LIABILITIES:              
  Accounts payable and accrued expenses $ 5,055,539     $ 11,769,107  
  Line of credit   3,300,000       562,500  
  Due to broker   1,050,197       1,367,389  
  Income taxes payable    -       21,122  
    TOTAL CURRENT LIABILITIES   9,405,736       13,720,118  
               
Deferred income tax liabilities   72,875       32,655  
Deferred rent payable   178,703       166,668  
Deferred compensation payable   515,485       528,687  
    TOTAL LIABILITIES   10,172,799       14,448,128  
STOCKHOLDERS' EQUITY:              
  Coffee Holding Co., Inc. stockholders' equity:              
  Preferred stock, par value $.001 per share; 10,000,000 shares authorized; no shares issued and outstanding   -       -  
  Common stock, par value $.001 per share; 30,000,000 shares authorized, 6,456,316 shares issued; 6,372,309 shares outstanding for 2013 and 2012   6,456       6,456  
  Additional paid-in capital   15,904,109       15,904,109  
  Retained earnings   6,024,982       7,979,247  
  Less: Treasury stock, 84,007 common shares, at cost for 2013 and 2012   (272,133 )     (272,133 )
    Total Coffee Holding Co., Inc. Stockholders' Equity   21,663,414       23,617,679  
  Non-controlling interest   330,964       181,945  
    TOTAL EQUITY   21,994,378       23,799,624  
      TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 32,167,177     $ 38,247,752  
               
               
               
COFFEE HOLDING CO., INC.  
CONDENSED CONSOLIDATED STATEMENTS OF INCOME  
(Unaudited)  
   
  Nine Months Ended     Three Months Ended  
  July 31, July 31,
  2013     2012     2013     2012  
NET SALES $ 100,375,542     $ 138,171,695     $ 32,370,692     $ 44,484,453  
                               
COST OF SALES (including $24.7 and $23.4 million of related party costs for the nine months ended July 31, 2013 and 2012, respectively. Including $6.3 and $5.9 million for the three months ended July 31, 2013 and 2012, respectively.)   96,463,019       128,472,249       33,526,657       40,606,840  
                               
GROSS PROFIT (LOSS)   3,912,523       9,699,446       (1,155,965 )     3,877,613  
                               
OPERATING EXPENSES:                              
  Selling and administrative   5,233,157       5,149,653       1,713,051       1,717,472  
  Officers' salaries   440,992       429,458       169,954       141,200  
    TOTALS   5,674,149       5,579,111       1,883,005       1,858,672  
                               
(LOSS) INCOME FROM OPERATIONS   (1,761,626 )     4,120,335       (3,038,970 )     2,018,941  
                               
OTHER INCOME (EXPENSE)                              
  Interest income   30,176       27,909       12,370       9,268  
  (Loss) income from equity investment   (105,204 )     (27,471 )     (158 )     3,627  
  Interest expense   (71,320 )     (153,294 )     (10,542 )     (46,762 )
    TOTALS   (146,348 )     (152,856 )     1,670       (33,867 )
                               
(LOSS) INCOME BEFORE INCOME TAXES AND NON-CONTROLLING INTEREST IN SUBSIDIARIES   (1,907,974 )     3,967,479       (3,037,300 )     1,985,074  
                               
  (Benefit) provision for income taxes   (490,108 )     1,460,792       (997,618 )     729,979  
                               
Net (Loss) Income Before Non-Controlling Interest in Subsidiary   (1,417,866 )     2,506,687       (2,039,682 )     1,255,095  
  Less: net income attributable to the non-controlling interest   (149,020 )     (67,394 )     (69,229 )     (23,899 )
                               
NET (LOSS) INCOME ATTRIBUTABLE TO COFFEE HOLDING CO., INC. $ (1,566,886 )   $ 2,439,293     $ (2,108,911 )   $ 1,231,196  
                               
Basic earnings per share $ (.25 )   $ .38     $ (.33 )   $ .19  
                               
Diluted earnings per share $ (.25 )   $ .37     $ (.33 )   $ .19  
                               
Dividends declared per share $ .06     $ .09     $ .00     $ .03  
                               
Weighted average common shares outstanding:                              
    Basic   6,372,309       6,372,309       6,372,309       6,372,309  
    Diluted   6,672,309       6,639,309       6,372,309       6,639,309  
                               
                               
                               
COFFEE HOLDING CO., INC.  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
NINE MONTHS ENDED JULY 31, 2013 AND 2012  
(Unaudited)  
   
  2013     2012  
OPERATING ACTIVITIES:              
  Net income (loss) $ (1,417,866 )   $ 2,506,687  
  Adjustments to reconcile net income to net cash (used in) provided by operating activities:              
      Depreciation and amortization   355,570       332,630  
      Unrealized gain on commodities   (317,192 )     (1,701,257 )
      Loss on equity method investments   105,204       27,471  
      Deferred rent   12,035       14,811  
      Deferred income taxes   229,000       628,000  
    Changes in operating assets and liabilities:              
      Accounts receivable   377,509       2,433,607  
      Inventories   2,147,252       2,277,100  
      Prepaid expenses and other current assets   299,518       86,813  
      Prepaid green coffee   (278,231 )     187,454  
      Prepaid and refundable income taxes   (1,860,797 )     175,939  
      Accounts payable and accrued expenses   (5,721,168 )     (6,216,243 )
      Deposits and other assets   11,621       14,619  
      Income taxes payable   (21,122 )     142  
                     
Net cash (used in) provided by operating activities   (6,078,667 )     767,773  
               
INVESTING ACTIVITIES:              
  Purchase of equity method investments   -       (2,100,000 )
  Proceeds from disposition of equity method investment   232,069       -  
  Purchases of machinery and equipment   (588,879 )     (517,033 )
                 
Net cash used in investing activities   (356,810 )     (2,617,033 )
               
FINANCING ACTIVITIES:              
  Advances under bank line of credit   6,788,920       129,236,460  
  Principal payments under bank line of credit   (4,051,420 )     (129,677,124 )
  Payment of dividend   (387,377 )     (581,067 )
                 
Net cash provided by (used in) financing activities   2,350,123       (1,021,731 )
               
               
NET DECREASE IN CASH   (4,085,354 )     (2,870,991 )
               
CASH, BEGINNING OF PERIOD   7,568,583       4,244,335  
               
CASH, END OF PERIOD $ 3,483,229     $ 1,373,344  
               
               
SUPPLEMENTAL DISCLOSURE OF CASH FLOW DATA:               
    Interest paid $ 73,261     $ 168,428  
    Income taxes paid $ 803,490     $ 570,160  
               
Contact:
CONTACT:
Coffee Holding Co., Inc.
Andrew Gordon
President & CEO
(718) 832-0800

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